Markets: Major Indices Are At Resistance (EPU, FDN, DIA, IWM, QQQ, SPY, XRT, IYZ, IYT)
Stocks ended the day mixed as volume waned. The Dow Jones Industrial Average (NYSE:DIA) was the only, of the five major indices, to post a loss yesterday, as it closed lower by a modest 0.1%. Higher beta stocks led the day as the Nasdaq (NASDAQ:QQQ), small-cap Russell 2000 (NYSE:IWM) and the S&P MidCap 400 all tacked on 0.3% by the closing bell. The S&P 500 (NYSE:SPY) ended the session fractionally higher.
Market internals ended the session mixed. Volume slid by 5.6% on the Nasdaq and 9.7% on the NYSE. However advancing volume once again topped declining volume on both exchanges. By the close, the ratio of advancing to declining volume stood at +1.6 to 1 on the NYSE and +1.5 to1 on the Nasdaq. Wednesday gave all the appearances of a consolidation day, as the major indices all traded in a tight range near the two day high. Every pullback seemed to find a bid. Yesterday’s light volume points to a lack of institutional involvement in the day’s price action.
The First Trust Dow Jones Internet ETF (NYSE:FDN) has been consolidating just above its 20-day EMA for the past four sessions. A move above the four day high of $32.89 could provide a buy entry trigger for FDN.
Yesterday, the iShares MSCI All Peru Capped Index ETF (NYSE:EPU) formed a massive reversal candle, as it undercut 200-day MA, filled the gap formed on Tuesday, and recovered to close near session highs. Notice that EPU is also on the precipice of rallying above its long term downtrend line. A volume fueled move above yesterday’s high of $40.40 could present a long opportunity in this ETF. Ideally, we would like to see EPU consolidate for several days prior to an attempted move higher. We are closely monitoring EPU as a possible trend reversal candidate.
Our open positions in (NYSE:IYT) and (NYSE:IYZ) showed relative strength yesterday, as they closed higher by 0.4% and 1.2% respectively. (NYSE:XRT) remains on the watchlist, but never came close to triggering yesterday. For the most part, Wednesday was an uneventful consolidation day for the broad market. For a second consecutive day, the big winners were industry groups that have lagged over recent months. It is noteworthy that all of the major indices are at, or close to major resistance levels and a pullback from the current levels is a distinct possibility.
The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.
Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: email@example.com.